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Standard Bank Group
Advtech 25 March 2026

A+ in higher-return divisions

Tinashe Hofisi

#themes: tertiary, rest of Africa

ADvTECH's FY25 performance was driven by strong momentum in its higher?margin divisions, Tertiary (+19%) and Rest of Africa (+14%) which continue to deliver sustained enrolment growth and underpin earnings outperformance relative to SA Schools. We expect a positive mix effect on group margins, with the combined contribution of Tertiary and RoA to group earnings likely to increase from 60% currently to c. 64% over the medium term, in our view. By contrast, we expect SA Schools enrolment growth to remain constrained in FY27E c. +2% (FY26: +1.4%), below the 3% - 5% target range, reflecting tighter debtor controls, capacity constraints in high-school and the deferral of new school rollouts to 2028 (previously expected in 2027). Once the rollout resumes, we estimate each new school could add c. 0.7% - 0.8% to group enrolment growth. To reflect our expectations of increased weight of higher-margin businesses (RoA + Tertiary), we raise our fair value range to R41 - R44 (prior: R39 - R42), implying a total return of 12% - 20%, including a dividend yield of 3.7%. 

Capital allocation remains growth?focused, execution key: We expect capital allocation to remain skewed toward reinvestment in growth rather than higher dividends or share buybacks, consistent with management's long-term value creation strategy. That said, in the event of subdued near?term share price performance, reflecting some investor concerns around valuation, share buybacks could emerge as a tactical lever, in our view. We believe ADH has sufficient headroom, supported by strong cash conversion (CFO/EBITDA: 101%) and a robust balance sheet (ND/EBITDA at 0.5x, with management targeting similar levels over the next few years, despite expansion plans). Overall, we view this as a continuation of ADvTECH's conservative capital discipline by the relatively new management, a trait some investors may value given the Group's strong historical track record (10-year CAGR: enrolments +11%, revenue +16%, dNEPS +17%). 

Key results highlights:

  • Group Revenue was up 10% y/y in FY25 (FY24: +8.4% y/y, SBGSe: +13.4%). Group enrolment was up 13%, in line with the prior year. Resourcing was a drag, with revenue down 6% due to the withdrawal of USAID impacting operations of c. 10% of the client base (NGOs and Charity organisations).
  • Group Operating Profit was up 14% y/y (FY24: +14% y/y) representing margin expansion of c. 80bps y/y to 21.8% (SBGSe: c. 21.5%).
  • FY25 dNEPS was up 17% y/y to 235cps (SBGSe: 238cps).
 

We forecast diluted NEPS of 274cps in FY26E (prior: 266cps) and 318cps in FY27E (prior: 299cps). Risks include financial leavers (up 18% in FY25), emigration (though recent trends showing a slight moderation), shortage of quality teachers, currency movements (RoA experienced a c. 8% FX impact on translation in FY25) and highly volatile nature of RoA markets.


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